Bitcoin below $56k puts stress on miners’ profitability, analysts say

As Bitcoin struggles to rally above $60,000, miners are facing profitability issues across the industry.

Bitcoin’s (BTC) temporary drop below $50,000 on Monday, August 5, has put many crypto miners in a difficult position as they are now facing profitability issues across the entire industry, Hashrate Index analysts say.

Hashrate Index analyst Kaan Farahani highlighted in a blog post that Bitcoin’s drop to $55,000 has caused a significant drop in the hashprice metric, which has fallen by 28% on a weekly basis, and that this has “put pressure on miner profitability.”

Bitcoin hashrate price in USD | Source: Hashrate Index

Despite the bearish price action, Farahani noted that Bitcoin’s global network hashrate “remained relatively stable throughout the week,” with the 7-day simple moving average network hashrate decreasing by only about 1%, from 644 EH/s to 638 EH/s.

“This modest response may signal a return to lower seasonal hashrate volatility in the coming weeks and months as energy curtailment programs are expected to ease for the hot summer months.”

Kaan Farahani

The slight decrease in hashrate led to an average block time of around 10 minutes and 12 seconds for the week. Hashrate Index analysts are predicting a “slight decrease” in mining difficulty of around 2% for the adjustment on August 14.

Bitcoin could still go lower

As Bitcoin struggles to break above $56,000, some analysts are not ruling out further declines. Despite the recovery from $49,000, analysts at CryptoQuant warn that a drop below the $57,000 support level could lead to a “potential drop to $40,000,” leaving investors uncertain about Bitcoin’s next move.

#Bitcoin It is down more than 16% in the last 24 hours and it settled below the $57,000 support level.

This breach signals a possible drop to $40,000.

Currently, investors are facing the most negative unrealized profit margins since November 2022. pic.twitter.com/gTWT52NO60

— CryptoQuant.com (@cryptoquant_com) August 5, 2024

A further drop in Bitcoin’s price could further pressure shares of crypto mining companies, which have already seen significant declines amid market chaos in Asia. Data from Hashrate Index shows that the average decline over the past week among 12 publicly traded Bitcoin mining companies is 21%. Bitdeer saw the biggest drop of 28.59%, while Iris Energy managed to limit its losses with a 12.31% drop.